MHA Says Bay State Hospitals Cut $3.1B in Expenses

An updated Massachusetts Hospital Association in-house study released this week shows that member hospitals in the Bay State trimmed $3.1 billion in operating expenses in the past two fiscal years.

This week's report, an update of MHA's April Hospital Costs in Context: A Transparent View of the Cost of Care report, details expenses of Massachusetts hospitals for fiscal year 2009 through the second quarter of FY 2010, and shows hospital cost trends have moderated substantially and in some cases reversed in response to the financial crisis and recession.

"The most current data shows that the trend in hospital expense growth reported earlier this year has abated," said Lynn Nicholas, president/CEO of MHA. "As a result of hospital cost management efforts, expense increases fell 65% from 2008 to 2009—from 8.6% to just 3%."

"All told, we're estimating hospital expense reductions worth some $3.1 billion in Fiscal Years 2009 and 2010. Expense growth has dropped back to very moderate levels, and this welcome change should be acknowledged by state policy makers and insurers," Nicholas said.

At the same time, payments to hospitals for the last two fiscal years were reduced more than $2.4 billion than they would have been had the FY 2004 – FY 2008 operational expenses trend continued, the study said.

Savings were found in the elimination of clinical and administrative positions, programs and services; cuts in compensation and benefits; changes in purchasing strategies, implementation of quality and process engineering techniques, and reduced non-essential spending, the report said.

"As the FY 2009 figures show, Massachusetts hospitals have responded to the call for cost reduction by health plans, government, and employers," Nicholas said. "Some of these changes were sparked by the economic downturn, but all the changes were driven by hospital initiative, and hospitals will strive to sustain this progress as part of our contribution to lasting reform and bending the cost curve. With real healthcare reform, the future will not replicate the past."

Nicholas said Massachusetts hospitals are committed to identifying greater cost efficiencies while maintaining quality of care, but that it needs to be implemented alongside "fundamental system reform, including fair and adequate payment to cover the cost of providing care, and adequate access to capital for health information technology and to modernize outdated facilities."

"Without these critical elements, hospitals will have to accelerate the closing of services and some hospitals may not survive. That means more than lost jobs and a drag on the economy; it means more limited access to healthcare, and that is not good for anyone," she said.